Brief Notes on five African EPZ programs.
Having seen the success of Mauritius, Dominican Republic and some other zones
around the world, many Sub-Saharan African countries have established or are considering
forming export processing zones
. However, data is not available for many of these rather
recent developments. Here we provide a limited amount of information on five Sub-Saharan
countries: Togo, Namibia, Kenya, Cameroon and Zimbabwe.
The Togolese approach seems to encompass all the necessary elements to make their
EPZs/EPFs into a successful ones. It was encouraged and supported by the American
Overseas Private Investment Corporation and USAID.
The Togolese investment code was revised in 1989 to provide part of an attractive EPZ
framework. As can be seen in Table 2, it allows a 10 year tax holiday after which the tax rate
will be 15 percent; no dividend taxes for 10 years; a tax rate of two percent (instead of seven
percent) on salaries; free movement of foreign exchange and profits; preferential tariffs also
apply on port charges, electricity and telecommunication services; and no tariffs on exports or
imports. Investment regulations accommodate foreign, domestic and joint ventures. The EPZ
law is such that in principle, it covers all of Togo, for any firm that produces mainly for export,
employs at least 80 percent of Togolese nationals on its work-force, uses mainly locally-
available raw materials, is labor-intensive or produces semi-processed inputs from local
enterprises. The zone firms are allowed sales in the domestic market. In 1995 their domestic
sales were 6.5 percent of their total exports. On the labor front, firms are given ample freedom
with regards to hiring, firing and grievances
. In addition, it was hoped that FDI would be
attracted to cheap labor (in 1990 labor costs averaged US 40cents), the transportation
infrastructure (deep sea port, reasonable airport and roads) and a good banking system.
The major goal for establishing the zones was employment creation to ease the serious
unemployment problem which followed structural adjustment programs launched in 1983. By
late 1990 the Lome EPZ, the first in Togo, was ready to take off. However, the process came
to a sudden halt due to the political unrest related to the democratization process. In 1994, the
political situation having settled, the activities in the Lome zone (located in the port area) started
Among them: Ghana, Mozambique, Madagascar, Sao Tome/Principe, Uganda, Tanzania, Benin, Cape
Verde, Sierra Leone (before the recent military coup), Liberia (historical, before the civil war), Botswana
and Mauritania. All of these countries have some type of EPZ initiative at some stage of
James Emery of FIAS (Financial Investment Advisory Service) at the IFC, Washington, D.C. greatly
contributed to this section.
Government intervened mid -1996 to strengthen labor protection.
up again. In 1995, the zone boasted 19 firms. In 1996, this number reached 29. The goal for
the year 2000 is 80 firms. By 1995 (1996), zone’s 19 (29) enterprises employed 3000 (4000)
Togolese (D. Seshie, 1996).
From all appearances, the Lome EPZ seems to finally be getting on track. D. Seshie
(1996) notes that two issues may waylay the zone’s ultimate success. She notes that firms have
a tendency to ignore the indigenous pool when hiring “cadres” in favor of non-national cadres.
This may hamper future transfer of technology and demonstration spillovers. Also, the Togolese
EPZs will have to face steep competition from the Cote d’Ivoire, Ghana and Nigeria industries
which dominate the market in the region
Namibia is a small country of 1.1 million inhabitants. It achieved full independence in
1990 and inherited a good infrastructure (telecommunication, water and electricity) from the
Colonial period under South African rules but has a weak industrial base. Nonetheless, with
some 90 percent of its imports originating from South Africa, and some 36 percent of its
exports directed to that market, Namibia is still viewed as a satellite economy to that of its
neighbor to the south. Import substitution attempts have failed. The country exports natural
resources (diamonds and minerals) to pay for its consumption. The government sees outward
orientation as the necessary strategy to ensure diversification, growth and development. Export
processing zones are to help with the building of an industrial base and increasing export
Talk about establishing EPZs in Namibia dates back to February 1995(Namib Times,
11/7/95). The law was passed in April 1996, allowing for establishment of EPZs anywhere in
the country and in any economic activity, not just in manufacturing. An EPZ enterprise may
choose to become either a stand-alone factory located anywhere in Namibia or an enterprise
within an industrial estate managed by a management Company. EPZ firms can be either
private or public companies and can be foreign owned. Also, “EPZ activities will be serviced by
privately owned and run companies. Investors have the choice to deal through the umbrella
organization (the ODC), or the EPZ management companies, thus avoiding cumbersome
government procedures (Namib times, 1995:18).”
Namibian labor law has been altered to make strikes and lock-outs illegal in EPZs, but
workers can join trade unions. The exchange rate regulations of the EPZ act do not seem to be
very clear about whether zone firms are free of exchange rate controls or are to sell their foreign
exchange to the central bank and be under currency control. The act simply seems to guarantee
foreign exchange conversion (with offshore banking provisions in the works).
Zone firms will be exempt from corporate taxes (which are normaly 35 percent),
customs duties, sales taxes, transfer and stamp duties forever. Individual expatriates sent to
Of course, this competition does not only affect EPZ firms but the rest of the Togolese industry as well.
Information on the Namibian zones obtained from the Namib Times, November 1995; Offshore Outlook,
volume 3, issue 29, March 1995; and the Ministry of trade and industry of Namibia.
manage and work in EPZs have to pay the Namibian income tax (maximum marginal rate of
personal income tax is 35%). There are no capital gains taxes.
The Walvis bay area, located on the South Atlantic Ocean, and the Arandis, located
close to the country’s deep sea port, seem to be the two major EPZ initiatives in Namibia.
Applications have also been placed to establish a zone in the capital and the Okahandja areas.
As of November 1996, 6 out of 11 firms in the Walvis Bay Zone have started
production. They employ approximately 2000 workers. Their production ranges from textiles
and charcoal to gem stones and motor vehicle components. The World Bank undertook a
supporting project, dealing with improvement of infrastructure, water and sewage treatment and
The Kenyan EPZ law was passed in November 1990 and is still in force. It provides
for 10 year tax holiday, 25 percent tax for the next 10 years, no withholding taxes for 10 years,
import duty exemptions on plant, machinery, equipment and raw materials, no foreign exchange
controls and VAT exemption. However, it was conceived in the context of an over-valued
exchange rate regime.
At present, there are three main EPZs
. One was funded by the World Bank (1990)
at Athi River near Nairobi and is public. The two others are privately owned and managed.
The Athi River zone was part of a policy reform package. It was designed with three goals in
mind: increase of foreign exchange earnings, job creation and providing demonstration effect to
producers by illustrating the profitability of exports.
As of 1995 most physical structure and infrastructure was essentially finished, and
considered to be of high quality. There were concerns about the financial viability of the zone.
The zone appeared to be unsuccessful compared with potential private sector alternatives. The
occupancy rate was still low. And it seems that the firms inside have not created the backward
domestic linkages the government had hoped would facilitate technological transfer. It has been
suggested that privatization of the zone and decisions about the management group and a fee
structure may help render it viable.
In 1993 the government undertook several major reforms. It eliminated exchange
controls and allowed for market determined rates. It eliminated import controls and licensing
and liberalized capital accounts. It is in the process of rationalizing the import tariff structure.
The government is targeting a uniform tariff. Quotas have been removed except for health and
security. An export assistance scheme has been put into place providing 50 percent subsidy for
Information partially obtained from conversations with Byam and Blake at the World Bank; World Bank
reports no. 13886 and 14698, and Mark Ocheng’s article “export-processing zones draw lukewarm
investor response” in the April 1991 of African Business.
S. M. Ita, Chief executive of the export processing zone authority in Nairobi Kenya in a presentation at
the 16th International Conferene of the WEPZA held in China in 1997, provides different numbers. He
claims that there are 12 privately owned zones of various sizes around the Nairobi airport and
Mombasa seaport and two very large public EPZs.
technical analysis and business advisory services. Macroeconomic management is reportedly
sound now, with no backtracking on trade reform.
In light of all the major policy liberalization, interest in EPZ project waned, though zones
are still reported to attract firms for tax purposes, their industrial set up and administrative ease.
The EPZ law was passed in 1990. It set three goals for the prospective zones in the
country: employment creation, export development and new investment promotion.
It allows for stream lining and facilitation of the administrative and customs procedures, and it is
to be managed by a private group. It also permits Export processing firms (EPFs) status to
firms which would supply themselves with national raw materials, transform them on site, and
export at least 80 percent of their production.
The law allows freedom from exchange rate and price controls. Sales of a percent of
the production in the domestic market is permitted after appropriate import taxes are applied.
All indirect and direct taxation and tariffs are waved for the first 10 years of a firm’s activities.
From then on, a 15 percent tax is levied on profits. Profits will be netted of 25 percent of the
salaries paid to nationals and of 25 percent of investment expenses before tax is applied.
Furthermore, there are no limits in claiming operational losses and no obligation to reinvest in the
maintenance and improvement of factories. These later provisions are rather favourable to firms
compared to the typical EPZ rules.
The zone enterprises are exempt from import and export tariffs, but have to pay for
services used in the process of importing or exporting. Enterprises are allowed to set their
wage range and do not have to pay dues to the social security (retirement system) fund if they
provide at least parallel terms for their employees. They have to ensure that 80 percent of their
employees are nationals.
Electricity and water expenses are subsidized. Obtaining telephone lines is facilitated
and provided at a promotional rate for the first five years of the firm’s operations.
No zone is presently active in Cameroon. There are two reasons for this outcome.
First, the processing of the applications have been slow due to under-staffing at government
offices in charge, thus discouraging investors. Second, the passage in 1992 of the US law
restricting USAID assistance to EPZs hurt the prospects for the Cameroon zones
was involved with the financing, logistical and developmental support of the EPZ project in
Cameroon and the lost support after the enactment of the law could not be replaced.
While there are no active zones there were 17 export processing firms functioning as of
March 1995. The projected export values for 16 of these firms are 461.1 Billion Francs
Information on Cameroon obtained from: Evaluation Du Fonctionnement du Regime de la Zone
Franche au Cameroon, 1995, prepared by Janel And Company LTD. for the Minister of Economy and
Finance of the Cameroon.
The US law was enacted in response to American labor groups campaign who accused government
institutions of using tax-payer money to “export American jobs abroad” and helping foreign
competition push U.S. workers out of their jobs.
(1.152B US )
. Their local supply purchases hover around 270 Billion Francs (0.675 B US
$). They employ 2567 workers. The indirect employment resulting from their activities stands
at 1027. The estimated value of these jobs is some 18 Billion Francs (45 Million US $). While
it is not possible to assess the total employment impact on the host economy, the authors argue
that there is a definite domestic impact from personnel training and knowledge spill-over.
However, the gross fiscal losses to the government from these firms activities are estimated at
37.3 Billion Francs (74.7 Million US $). There have also been administrative difficulties in
providing and securing delivery of “bonded” imports and exports from and to EPF sites due to
A law for creating an supervisory board was passed in 1993-94, but no further action
has been taken to actually implement a zone. Two primary goals were stated with regards to the
EPZ: employment creation and use of the zone to jump-start an export led growth push.
The law provides the following incentives to attract investors: 100 percent remittance of
net profits after tax for investors; a 5-year tax holiday, 15 percent corporate tax and exemption
from import duties. Investment in the zone will be open to foreign and domestic investors. For
now, it is stipulated that a firm would qualify if it is exporting 80 percent of its production.
Zimbabwean business community want to reduce it to 50 percent for the first year and allow the
firms to build their exports up to 80 percent by the third year. The zones will be privately
owned and the law allows for EPFs.
The law stipulates suspending the national labor laws inside the EPZs to encourage
investment and job creation. But in 1995 efforts were being made to amend the zone law to
ensure compliance with domestic regulations arguing that waving workers protection laws was
short sighted and could lead to unrest were zones to become active in the country.
The average rate of exchange was 400.14 Cameroon Francs to 1 US dollar for 1995.
Information from : “Zimbabwe: Free Trade Zone” in Southern African Economist, Dec 94/Jan 95; Staff
Appraisal Report: Zimbabwe, Report No. 15062-Zim, April 1996, the World Bank.
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Bermudez, S. 1993. “The Case for Private Free Zones” in Richard L. Bolin (ed.) Public Vs.
Private Free Zones. The Flagstaff Institute, 1993.
Bermudez, S. 1990. “ Linking the Maquiladoras (EPZs) to Local Industry” in Richard L. Bolin
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Bermudez, S. 1996. “Mexico” in Richard L. Bolin (ed.) Impact of 57 New Export Processing
Zones in Mercosur, The Flagstaff Institute.
Broad, R. and J. Cavanagh. 1993. Plundering Paradise - The Struggle for the Environment in
the Philippines. University of California Press.
Chen, Xiangming. 1995. “The Evolution of Free Economic Zones and the Recent
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Documents you may be interested
Documents you may be interested